10/14/2016

Does the establishment is using derivatives to fake earnings and hide debt?

Along with credit default swaps and other exotic instruments, the total notional derivatives value is about $1.5 quadrillion – about 20% more than in 2008, beyond what anyone can conceive, let alone control if unexpected turmoil strikes. Many of the large multinational corporations, sovereign governments, and likely all financial institutions have used derivatives to fake earnings and hide debt.Nobody knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount. Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP. The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1. The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion. The cumulative effects of decades of interventions to mask economic weakness are harmful to the economy.
Sources:
  http://www.safsal.co.il/bneiyehuda/forum/viewtopic.php?p=2586